I sleep with my hair down. I'm far too lazy to get up early every day to wash my hair, so I've always done this...but a trick that I've found recently is to go to sleep with my hair 'crunchy' from gel, so that if I move around in my sleep I'm scrunching out the crunch, as opposed to fluffing up my hair.
The other method I've tried is the one that Ephesians2:8 said, but I've never really gotten the hang of it, to be honest. Usually, the ends of my hair end up a lot curlier than the roots so I get a demented looking triangle. I think the problem is that I don't wet my hair enough, I just spray it with water and conditioner in a bottle...
Before I figured out the crunch method, I'd just fan out my hair behind me and try not to move, which is not fun. Seriously.
Fine and thin 2C in Australia